Fall 14 Q5
Just wondering why the regulator would be concerned with tying. Despite being made illegal under Clayton, it isn't explicitly addressed by Sherman so it's technically a legal thing to do right?
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Just wondering why the regulator would be concerned with tying. Despite being made illegal under Clayton, it isn't explicitly addressed by Sherman so it's technically a legal thing to do right?
Comments
I understand the issue with tying like this:
Suppose also that both require tying, so that a customer cannot get auto or HO separately from either insurer. In other words they must buy both or neither and pay $1,300 in total.
The regulator's issue is that customers would probably want to buy auto from insurer B for $900 and HO from insurer A for $300 for a total of $1,200. Tying prevents them from getting the overall lowest price which could be considered anti-competitive.
My understanding based on Clayton is that tying is not legal because the Clayton Act was designed to supersede the Sherman Act and fill in loopholes. (Unless you've found a different exam question somewhere that implies something different.)